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Corporate Foresight in Small and Medium-Sized Enterprises WWW.EFMN.INFO The European Foresight Monitoring Network Corporate Foresight in Small and Medium-Sized Enterprises Foresight Brief No. 101 Authors: Kai Jannek [email protected] Klaus Burmeister [email protected] Sponsors: Supported by the Federal Ministry of Education and Research (BMBF) within the framework of Innovation and Technology Analyses (ITA), Z_punkt GmbH Type: National expert survey Organizer: Z_punkt GmbH The Foresight Company, Klaus Burmeister, [email protected] Duration: 2007-2008 Budget: NA Time Horizon: NA Date of Brief: June 2007 Purpose The objective of this research project is to identify the foresight requirements of German small and medium-sized enterprises (SMEs), their corporate foresight activities, to the extent that they exist, and limiting factors for systematic foresight approaches. To this end, an expert survey was conducted with SME decision-makers. Its purpose is to make executives more aware of the indispensability and the potential foresight offers in changing markets and business environments, and supporting them in their foresight approaches. concerning foresight needs, and a three-point Likert scale SMEs – A White Spot (1=regularly, 2=sometimes, 3=never) for most questions about in Corporate Foresight Research foresight activities. Closed questions are always followed by open questions to elicit additional information. So far, empirical corporate foresight research has focused solely on large-scale corporations in the respective European Survey Participants and countries, and in Europe as a whole. The foresight needs and activities of SMEs, in contrast, have stayed below the radar, their Market Environments even though the value of SMEs’ contribution to employment, value creation, and innovation is well recognized. 1,000 German companies were invited to take part in the sur- This research project aims to analyse the market situation and vey; 115 of which responded (11.5%). Based on annual sales business environment of SMEs and, in doing so, assess their volume, the participants can be classified as foresight needs. Furthermore, there is the question whether • traditional SMEs (< 50 mio. €: 38%), and in what way SMEs explore possible future market and envi- ronmental developments and utilize the resulting knowledge. • upscale SMEs (50 mio. – 1,000 mio. €: 49%), and Z_punkt GmbH prepared and mailed a questionnaire (in digi- • corporate-like SMEs (> 1,000 mio. €: 13%). tal and paper form) to SME executives. To permit comparabil- 17% of participants have fewer than 100 employees, 29% ity, the survey gives closed questions using a five-point Likert have between 100 and 250, 20% have between 250 and 1,000 scale (1=strongly agree, 5=strongly disagree) for most queries employees, and 34% employ more than 1,000 people. The EFMN is financed by the European Commission DG Research. It is part of a series of initiatives intended to provide a ‘Knowledge Sharing Platform’ for policy makers in the European Union. More information on the EFMN and on the Knowledge Sharing Platform is provided at WWW.EFMN.INFO Corporate Foresight in Small and Medium-Sized Enterprises: Foresight Brief No. 101 Market Environments This would make foresight more useful to SMEs’ future plans The participants come from a wide range of industries, most than short-sighted market research. The monitoring focus would have to be on the future development of high-impact prominently machine building (10%), construction (9%), automotive and logistics (9%), marketing and media (9%), market determinants, i.e. business clients (2.1) and competi- food (8%), retail (8%), IT and software (8%). tors (2.3). SME executives consider consumers, new market entrants, suppliers and substitutes (2.7, 2.9, 3.0, 3.2, respec- Asked for their main regional markets, almost all participating tively) to be of lesser importance. SMEs (95%) operate in Western Europe. Some also cover North America (15%) and Eastern Europe (13%). China and Market determinants with a high impact on Japan, on the other hand, currently only play a very minor role market changes (3% and 2%, respectively). strongly agree agree neither agree nor disagree disagree strongly disagree Substitutes SMEs’ Foresight Needs New market entrants Competitors It is assumed that the foresight needs of an SME can be de- rived from several indicators. Accordingly, survey participants Suppliers were asked to assess their market and business environment Business clients dynamics, and their companies’ development plans. Consumers 0% 20% 40% 60% 80% 100% Regional Expansion: Share of times mentioned Source: Z_punkt Eastern Europe Major Point of Interest The more a company is willing to change, the more it depends on foresight knowledge to provide security for investment Changing Business Environments decisions. The pressure to act is mainly the result of intense It is assumed that market dynamics are, to a certain degree, the competition in terms of price (1.8 on average on the five-point product of environmental changes. Hence, the latter have to be Likert scale) and quality (2.2), but also innovation and time closely examined to project future market developments as far (2.6 and 2.7, respectively). Many SMEs seek to escape height- as possible. SME executives also see an increase in the dy- ened competition by focusing on regional expansion and namics of their business environments. These have changed product innovation. strongly over the last three to five years (2.2) and further shifts 47% of all survey participants are mainly interested in expand- are expected for the next three to five years (2.0). Here, tech- ing their business to Eastern Europe. China (32%), Western nology, economics (2.3 each) and politics (2.6) are key envi- Europe (25%), North America (23%) and Japan (15%) are ronmental sectors, while society and ecology (2.9 and 3.2) are also future target markets. not perceived to be crucial. Incremental Improvements Dominate STEEP sectors with a high impact on market and business environment changes With regard to innovation activities, incremental improve- strongly agree agree neither agree nor disagree disagree strongly disagree ments dominate (87%), but fully new products and services Politics have also been developed in recent years (64%). Furthermore, new production processes (46%) and new business models Ecology (35%) have been pursued. Only 2% of the participating SMEs Economics have not innovated at all. Technology Short Lead Times Society However, development lead times for new products remain 0% 20% 40% 60% 80% 100% short, with 28% of all SMEs surveyed having a short (0-1 year), Share of times mentioned Source: Z_punkt 44% a medium (1-3 years), and 10% a long time horizon (over 3 years). 18% have no standardized development times. There- fore, market research might suffice to satisfy contextual knowl- Foresight Needed in Dynamic Markets and Environments edge needs given that the relevant markets and business envi- SME executives prepare for regional expansion and innova- ronments remain relatively stable within planning cycles. tion activities. Their planning cycles are rather short. How- ever, since SMEs operate in highly competitive and dynamic Market Perception: Increasingly Dynamic markets, it is assumed that their foresight requirements are However, SME executives perceive their markets as increas- substantial. From their point of view, the most important fields ingly dynamic. They consider their markets to have changed for environmental scanning and monitoring are technology, strongly in the last three to five years (2.0) and further signifi- economics and politics. Within their relevant markets, SMEs cant changes are expected for the next three to five years (1.9). have to focus primarily on exploring possible actors’ strate- Page 2 of 4 Corporate Foresight in Small and Medium-Sized Enterprises: Foresight Brief No. 101 gies. However, there is reason to challenge the SMEs’ ratings In contrast, external scientists (regularly: 8%, sometimes: to a certain extent. Given that many SMEs have business cli- 40%) and specialized departments such as R&D (regularly: ents, but that end consumers complete every value chain, con- 39%, sometimes: 16%) or strategy (regularly: 40%, some- sumers as an important market determinant and society as an times: 20%) are rarely involved. The latter fact may be ex- essential environment determinant may be underrated. plained by the size of the companies surveyed. SMEs’ Foresight Activities Foresight participants in SMEs regularly sometimes never Cooperation partners In part, SMEs respond to their foresight demands with more or Competitors less pronounced foresight activities. Suppliers Clients Expert groups Foresight Systematics and Methods Applied Business Scientists Consultants 85% of the SMEs regularly monitor developments in their Task force markets and industries (sometimes: 14%, never: 1%). Fur- Individual employees Top Management thermore, 29% frequently scan markets and industries they are Strategy not competing in for new developments (sometimes: 61%, Sales Marketing never: 10%). 74% of the SMEs surveyed regularly monitor R&D issues, trends and new technologies considered relevant for 0% 20% 40% 60% 80% 100% their business (sometimes: 26%, never: 0%); additionally, Share of times mentioned Source: Z_punkt 30% often scan their environments for new issues, trends and technologies whose relevance cannot yet be assessed (some- Foresight is mainly used for strategic planning (1.7 on the times: 60%, never: 10%). five-point Likert scale mentioned
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